With CPI Data Providing No Shocks, Stocks Prepare to Hop

The July Consumer Price Index gained 0.3%, in line with economists' expectations and up from June's flat rate.
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The producer bone's connected to the consumer bone.

The July

Consumer Price Index

was in line with expectations, surprising no one who watched the

Producer Price Index

come out weaker than expected last Friday.

The CPI gained 0.3%, matching the

Reuters

revised poll forecast and up from June's flat rate. The core rate, which excludes food and energy costs, gained 0.2%, a tad lower than the expected jump of 0.3% and up from the 0.1% clip in the previous month.

The numbers aren't low enough to stop the

Fed

from raising rates by 25 basis points next week, of course. The market's considered that hike a given for some time now. But they do diminish fears of a subsequent hike at the Fed's next meeting on Oct. 5.

"The market was expecting a benign number, and that's what we got," said Jim Volk, co-director of institutional trading at

D.A. Davidson

. Based on that alone, Volk is looking for a technical rally today.

But don't expect a repeat of Friday's huge rally. "We'll get continuation of yesterday's bounce, then level off," Volk said.

Bonds and stock futures were getting some support in the wake of the CPI. At 8:45 a.m. EDT, the 30-year Treasury was up 24/32 to 101 9/32, its yield falling to 6.032%. The

S&P 500

futures were up 6.9, about 9 points above fair value and indicating a jump at the open.

Asian markets were mixed overnight in thin trading ahead of the CPI report.

In Tokyo, where the trading lull was compounded by the continuing summer Obon holidays, the

Nikkei

picked up a scant 34.06 to 17,860.09 on sharply negative breadth. Stock and foreign-exchange markets didn't take well to

Bank of Japan

Governor

Masuru Hayami's

suggestion that Japanese companies would do well not to rely on the government to intervene in forex markets -- a hint that the BOJ might not be as ready to sell yen for dollars and euros as it has been in the recent past.

The statement helped send the dollar down to 114.46 yen, off an earlier high of 114.90.

The yen also rose to 120.715 yen per euro, its highest level yet against that currency. Not helping matters for the euro was a nasty rumor that an Italian government pension fund is having trouble locating 3 trillion lira -- that's about $160 billion -- listed on its balance sheet.

In Hong Kong, the

Hang Seng

fell 111.62, or 0.9%, to 12,783.16.

European bourses were on the upswing at midmorning in the wake of the CPI. In London, after having earlier fallen as much as 50 points, the

FTSE

was off 10.9 to 6224.5, despite the news that the U.K.'s core inflation rate fell to 2.2% in June, below the government's 2.5% target for the fourth straight month and giving the

Bank of England

no immediate reason to move its benchmark rate higher than the current 5%.

In Paris, the

CAC

was up 27.33 to 4486.08, while Frankfurt's

Xetra Dax

was 31.16 higher to 5288.26.

Tuesday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Earnings/revenue reports and previews

(Earnings estimates are from

First Call

.)

Applied Materials

(AMAT) - Get Report

is expected to report earnings after the close. The 29-analyst estimate calls for the company to earn 53 cents in the third quarter.

Cost Plus

(CPWM)

reported second-quarter earnings of 8 cents a share, a penny ahead of the 11-analyst estimate and up from the year-ago 1 cent.

Deere

(DE) - Get Report

reported third-quarter earnings of 29 cents a share, ahead of the 20-analyst estimate of 25 cents, but down from the year-ago $1.19.

Dell

(DELL) - Get Report

is expected to report earnings today after the close. The 30-analyst estimate calls for earnings of 17 cents a share.

Hewlett-Packard

(HWP)

after the close yesterday reported earnings of 85 cents a share, ahead of the 21-analyst estimate of 80 cents and up from the year-ago 58 cents.

Limited

(LTD)

posted second-quarter operating earnings of 26 cents a share, in line with the 19-analyst estimate and up from the year-ago 13 cents.

Tiffany

(TIF) - Get Report

reported second-quarter earnings of 31 cents a share, ahead of the 15-analyst estimate of 24 cents and up from the year-ago 19 cents.

Mergers, acquisitions and joint ventures

Excite@Home

(ATHM) - Get Report

has invested $15 million in

Tickets.com

and will invest an additional $40 million, subject to regulatory approval.

Global Crossing

(GBLX)

said it has chosen French telecommunications company

Alcatel

(ALA)

to build a South American part of Global's fiber-optic network in a $700 million deal.

World Access

(WAXS)

, a telecommunications company, is buying privately owned

FaciliCom International

.

Offerings and stock actions

Morgan Stanley Dean Witter

priced

Silverstream's

(SSSW:Nasdaq) 3 million-share IPO above-range at $16.

Miscellany

America Online

(AOL)

said worldwide membership of its AOL service has exceeded 18 million.

The Heard on the Street column in

The Wall Street Journal

, citing people familiar with the matter, reports that

First Union

(FTU)

, unhappy with the tenor of

Bear Stearns

analyst Sean J. Ryan's sharp criticism of the bank, suspended its bond-trading business at Bear Stearns, and in response, Bear Stearns directed Ryan not to make negative comments about the bank. The column notes that Ryan hasn't written or said anything publicly about First Union since late June. The

Journal

article said First Union did restore its fixed-income trading business with Bear Stearns nearly instantly.

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